Conduct Committee

Lord Vaux of Harrowden Excerpts

Tuesday 20th April 2021 Lords Chamber

[Lord Vaux of Harrowden (CB) [V]]

My Lords, last week, the Times described this debate as a battle of “prominent lawyer-peers”. Not being a lawyer, I tiptoe on to the battlefield with trepidation and hope not to get my head shot off in the crossfire.

To start with, I make it clear that I agree that it is manifestly right that we should be transparent about interests involving foreign states, just as with any potential conflict of interest. However, these rules as proposed appear aimed more at the direct personal provision of advice and seem less well suited to more normal employment situations. I fear they may have unintended consequences in some circumstances.

Let me give a theoretical example based on my experience. Before joining the House, I was employed by a large American multinational company which provided software and related services to a wide range of customers globally, including financial services, education and emergency services. I should be clear that I have not been employed by the company since I joined the House. Most customers were not state-owned organisations, but among them were state-owned banks, sovereign wealth funds, state debt management offices, many hundreds—possibly thousands—of US high schools and universities, and other state authorities and emergency services in the US.

My role in the company, which was not customer facing, would probably not have been affected by the amended code. However, it is easy to see situations where other roles might have been caught. For example, a software engineer or product designer creating something as innocuous as a login module, which might be used across multiple products, could find their work routinely provided to many of the state-related entities I mentioned. Whether that would be caught by the wording of “personally provides services” is not clear to me, but certainly that person’s personal work would be provided to the customer. If that same person was also part of the helpline—perhaps assisting customers having login problems—that would certainly be a personally provided service. In that example, I think people would agree that it clearly would not make sense to have to list the many hundreds of US high schools and universities using the software, only part of which was created by the employee.

On top of that, there is the issue of customer confidentiality. My employment contract included robust customer confidentiality clauses and, as is normal in the industry, most customer contracts also included confidentiality clauses. To meet the proposed code, in my example all of the relevant customers, which might be many hundreds, would need to consent to the disclosure of their details and the employer would need to consent to the breach of the employment contract. That simply would not happen. It would be much easier for the employer to terminate the employment or to employ someone else. Further, it would be difficult, even impossible to say what level of remuneration related to the foreign state entities, even if the employer allowed it.

I confess that I find the wording of paragraphs 57(b) and 64 somewhat confusing. To take my example further, let us say that the Member is paid a fixed salary of £50,000 a year by the employer, and the total annual revenues to the employer from the relevant state-related customers totals many millions out of perhaps many hundreds of millions of the total revenue of the employer. I am not at all clear what should be registered here. Should it be the salary, the revenues by customer for the potentially many hundreds of US high schools, or something in between?

The challenge we face is that every situation is different and a one-size-fits-all approach may have the unintended consequence of causing a perfectly reasonable employment to be terminated. In the example that I have given, would it not be sufficiently transparent to register the employment, describe the types of customers and which countries, and disclose the total remuneration received by the Member from the employer? Providing individual details, as the code will require, including trying to apportion revenues of a host of arm’s-length customers, may not be practical or possible and, frankly, may not add much to the transparency anyway.

I said at the start that I support the principle of these proposed changes and I suspect that the practical issues that I have raised will not be common. Therefore, I do not support the amendment in the name of the noble and learned Lord, Lord Garnier. However, I urge the Conduct Committee to keep under review whether the new rules are creating an impediment to perfectly normal and reasonable employment situations, and if necessary to introduce some flexibility to look at particular situations and advise appropriate disclosure on a case-by-case basis that does not necessarily involve naming the underlying individual clients.

On the other hand, there is one area where the code may need tightening further in respect of foreign state entities—that of employment in a sales or an introduction role. It is not hard to imagine that being a Member of this House might open doors. If, for example, a Member, as an employee or consultant, made or facilitated a sale of a software solution to a foreign state, the Member would not be providing any service to that foreign state customer. The employment or consultancy relationship would have to be registered, but because no service was being personally provided to it the foreign state connection would not have to be disclosed under the proposed rules, even if the Member received a commission from the employer directly related to the sale or introduction. That feels like something that ought to be disclosed.

While I do not agree with everything in the amendment from the noble Lord, Lord Balfe, mainly because we need to recognise that this House is different from the full-time salaried House of Commons, and I will not therefore support the amendment, I agree that these matters must be kept under review to make sure that we are properly transparent about potential conflicts of interest.